Press Releases

Avon Reports Fourth-Quarter and Full-Year 2012 Results

Fourth-Quarter Revenue Down 1% (Up 1% in Constant Dollars)

Full-Year Cash from Operations $556 Million

Feb 12, 2013

NEW YORK, Feb. 12, 2013 /PRNewswire/ -- Avon Products, Inc. (NYSE: AVP) today reported fourth-quarter and full-year 2012 results. "2012 was a challenging year for Avon, but I'm encouraged to see that the overall business is showing early signs of stabilization," said Sheri McCoy, Chief Executive Officer. "We have a lot of work ahead of us, but I am confident that in 2013, we will see progress against our three-year financial goals."

Fourth-Quarter 2012 (compared with fourth-quarter 2011)

For the fourth quarter, total revenue of $3.0 billion decreased 1%, but increased 1% in constant dollars. Total units grew 2% and price/mix decreased 1% during the quarter. Active Representatives were up 1%.

Fourth-quarter 2012 gross margin was 59.8%. Adjusted Non-GAAP gross margin was 59.9%, 130 basis points lower than the prior-year quarter, primarily due to unfavorable mix reflecting actions to flow inventory, mainly in Brazil as well as flowing more unit-driving offers in several key markets.

Operating profit was $11 million in the fourth quarter of 2012 and operating margin was 0.4%. Adjusted Non-GAAP operating profit was $277 million and adjusted Non-GAAP operating margin was 9.2%, down 20 bps from the fourth quarter of 2011. The lower gross margin was almost fully offset by lower operating expenses, primarily due to lower net brochure costs, lower overhead and advertising expenses. Additionally, foreign exchange negatively impacted operating margin.

Fourth-quarter 2012's effective tax rate was 1845% versus 102% in the fourth quarter of 2011. On an adjusted Non-GAAP basis, the effective tax rate was 35.9%, versus 32.2% in the fourth-quarter 2011.

Loss from continuing operations in the fourth quarter of 2012 was $161 million, or $0.37 per share. Adjusted Non-GAAP net income from continuing operations was $162 million, or $0.37 per share.

Adjustments to Fourth-Quarter GAAP Results

During the fourth quarter of 2012, the following items had a significant impact on the financial results:

As a result of the weaker-than-expected performance in the fourth quarter of 2012 in our Silpada business and the corresponding lowering of our long-term growth estimates for this business, our annual impairment assessment of the fair value of goodwill and intangible assets related to the business resulted in a Q4 non-cash pre-tax impairment charge, within operating profit, of $209 million, or $0.31 per share.

In the fourth quarter of 2012, we also recorded costs to implement ("CTI") restructuring charges, within operating profit, of $58 million pre-tax, or $0.09 per share, most of which relate to our previously announced cost savings initiative.

The fourth-quarter results benefited from a release of a provision, within other income, of $24 million, or $0.03 per share, associated with the excess cost of acquiring U.S. dollars in Venezuela at the regulated market rate as compared to the official exchange rate. This provision was released as the Company capitalized the associated intercompany liabilities.

During the fourth quarter of 2012, we determined that the Company may repatriate offshore cash to meet certain domestic funding needs. Accordingly, we are no longer asserting that the undistributed earnings of certain foreign subsidiaries are indefinitely reinvested, and therefore, we recorded an additional provision for income taxes of $168 million or $0.39 per share.

Full-Year 2012 Results (compared with full-year 2011)

Total revenue of $10.7 billion decreased 5%, or was flat in constant dollars. Total Beauty sales declined 5%, or increased 1% on a constant-dollar basis. Active Representatives declined 1% and units sold were flat.

Operating profit of $315 million decreased 63% and operating margin was 2.9%, down 470 basis points. Adjusted Non-GAAP operating profit was $693 million, down 40%, and adjusted Non-GAAP operating margin was 6.5%, down 380 basis points from a year ago.

Full-year loss from continuing operations was $38 million, or $0.10 per share, compared with income of $526 million, or $1.20 per share, last year. Adjusted Non-GAAP income from continuing operations was $373 million, or $0.85 per share, compared with $719 million, or $1.64 per share.

Adjustments to Full-Year 2012 GAAP Results:

During 2012, the following items had a significant impact on the financial results:

CTI restructuring initiatives related to previously announced cost savings initiatives of $125 million pre-tax, or $0.19 per share

China non-cash impairment charge of $44 million pre-tax, or $0.10 per share

Silpada non-cash impairment charge of $209 million pre-tax, or $0.30 per share

Benefit from release of a provision of $24 million, or $0.04 per share, associated with the excess cost of acquiring U.S. dollars in Venezuela at the regulated market rate as compared to the official exchange rate

Additional provision for income taxes of $168 million, or $0.39 per share, associated with the potential repatriation of foreign earnings

Cash flow from operations was $556 million for the twelve months ended December 31, 2012, $100 million lower than in the same period in 2011, due to lower net income and higher payments associated with CTI restructuring initiatives, which were partially offset by improvements in working capital, lower contributions to the U.S. pension plan, and a payment in 2011 associated with a long-term incentive compensation plan of $36 million. The overall net cash used in the twelve months ended December 31, 2012 was $36 million, compared with net cash provided of $65 million for the same period in 2011, primarily due to lower issuances of commercial paper, partially offset by the proceeds related to the term loan agreement, the scheduled repayment of our notes in 2011, lower dividend payments, lower capital expenditures and the termination of two of our interest-rate swap agreements.

Avon's net debt (total debt less cash) as of December 31, 2012 was $2.0 billion, down $77 million from December 31, 2011.

Estimated Impacts from 32% Venezuelan Currency Devaluation

The Venezuelan government has announced its intention to devalue its currency by approximately 32%. Although no official rules have been issued, the official exchange rate is expected to change from 4.30 Bolivars to the U.S. dollar to 6.30 Bolivars to the U.S. dollar, effective February 13, 2013, and the regulated SITME market will be eliminated. Based on a preliminary analysis, Avon anticipates the following impacts, both of which will be excluded for purposes of calculating adjusted Non-GAAP results during 2013:

One time after tax loss estimated to be approximately $50 million in the first quarter of 2013, primarily reflecting the write-down of monetary net assets and deferred tax benefits;

Estimated charges of approximately $50 million associated with the historical cost in U.S. dollars of non-monetary assets, such as inventory, primarily during the first half of 2013.

In addition, had the devaluation occurred at the beginning of 2012, Avon's revenue and adjusted Non-GAAP operating profit would have been adversely impacted by approximately 2% each, assuming no mitigating factors, such as price increases.

Note: Effective in the second quarter of 2012, the Dominican Republic was included in Latin America, whereas in prior periods it had been included in North America. The impact was not material to either segment. Accordingly, Latin America amounts include the results of the Dominican Republic for all periods presented.

Fourth-quarter constant-dollar revenue increased, primarily due to an increase in Active Representatives. Units sold increased 6%, primarily attributable to Brazil.

Brazil revenue was down 3%, or up 10% in constant dollars, primarily due to an increase in Active Representatives.

Mexico revenue was up 9%, or 4% in constant dollars, driven primarily by an increase in Active Representatives partially offset by a decline in average order.

Venezuela revenue was up 2% in both reported and constant dollars, as average order benefited from the inflationary impact on pricing, but was partially offset by a decrease in Active Representatives.

The increase in adjusted Non-GAAP operating margin was due to lower net brochure costs and improved bad debt and distribution expenses. This was partially offset by a decline in gross margin, primarily due to the unfavorable net impact of pricing and mix partially due to a planned initiative to flow excess inventory, primarily in Brazil. Foreign exchange and higher investments in Representative Value Proposition² ("RVP") also negatively impacted operating margin.

Europe, Middle East & Africa

$ in millions

Fourth-Quarter 2012

FY 2012

% var. vs
4Q11

% var. vs
12M11

Total revenue

$ 905.8

1%

$2,914.2

(7)%

C$

2%

(1)%

Active Representatives

1%

-%

Units sold

5%

-%

Operating profit

131.4

(4)%

312.8

(35)%

Adjusted Non-GAAP operating profit

131.5

(5)%

324.6

(33)%

Operating margin

14.5%

(80) bps

10.7%

(460) bps

Adjusted Non-GAAP operating margin

14.5%

(100) bps

11.1%

(440) bps

Note: Effective in the second quarter of 2012, the results of Central and Eastern Europe and Western Europe, Middle East & Africa were managed as a single operating segment. Accordingly, Europe, Middle East & Africa amounts include the results of Central and Eastern Europe and Western Europe, Middle East & Africa for all periods presented.

Fourth-quarter constant-dollar revenue increased primarily due to an increase in Active Representatives and unit growth.

Revenue in Russia was up 3% in both reported and constant dollars, primarily due to higher average order and an increase in Active Representatives.

Revenue in the U.K. was flat, or down 2% in constant dollars, primarily due to a decrease in Active Representatives, partially offset by higher average order.

Revenue in Turkey was up 1%, or down 1% in constant dollars, primarily due to lower average order, partially offset by growth in Active Representatives.

Revenue in South Africa was flat, or up 8% in constant dollars, primarily due to growth in average order, partially offset by a decrease in Active Representatives.

The decline in adjusted Non-GAAP operating margin was due to lower gross margin, caused by the unfavorable impact of pricing and mix due to planned investments in unit-driving offers across all price tiers. This decline was also partially offset by improved bad debt expense and lower net brochure costs, primarily in Russia.

North America

$ in millions

Fourth-Quarter 2012

FY 2012

% var. vs
4Q11

% var. vs
12M11

Total revenue

$516.2

(12)%

$1,906.8

(8)%

C$

(12)%

(8)%

Active Representatives

(13)%

(12)%

Units sold

(11)%

(6)%

Operating loss

(201.4)

17%

(214.9)

(14)%

Adjusted Non-GAAP operating profit

26.6

25%

24.6

(75)%

Operating margin

(39.0)%

230 bps

(11.3)%

(220) bps

Adjusted Non-GAAP operating margin

5.2%

160 bps

1.3%

(350) bps

Note: Effective in the second quarter of 2012, the Dominican Republic was included in Latin America, whereas in prior periods it had been included in North America. The impact was not material to either segment. Accordingly, North America amounts exclude the results of the Dominican Republic for all periods presented.

Fourth-quarter North America revenue declined 12%, primarily due to a decrease in Active Representatives.

The North America Avon business revenue declined 11%, primarily due to a decrease in Active Representatives, partially offset by higher average order.

Silpada revenue declined 18%, primarily due to a decline in average order as well as a decrease in Active Representatives.

The increase in adjusted Non-GAAP operating margin was due to lower overhead expenses, which include compensation costs, and lower advertising costs, which were partially offset by increased investments in RVP primarily related to the One Simple Sales Model implementation. The increase in operating margin was also impacted by higher gross margin at Silpada, which was partially due to the decrease in silver prices and favorable net impact of pricing and mix.

Asia Pacific

$ in millions

Fourth-Quarter 2012

FY 2012

% var. vs
4Q11

% var. vs
12M11

Total revenue

$ 246.6

(3)%

$902.4

(4)%

C$

(6)%

(5)%

Active Representatives

(8)%

(9)%

Units sold

(9)%

(7)%

Operating profit

8.8

(64)%

5.1

(94)%

Adjusted Non-GAAP operating profit

21.8

(11)%

67.3

(17)%

Operating margin

3.6%

(590) bps

0.6%

(800) bps

Adjusted Non-GAAP operating margin

8.8%

(80) bps

7.5%

(110) bps

Fourth-quarter constant-dollar revenue decreased primarily due to continued weakness in China.

Revenue in China declined 23%, or 24% in constant dollars, primarily as a result of a decline in units sold. We continue to focus on independently owned retail locations (Beauty Boutiques).

Revenue in the Philippines grew 7%, or 2% in constant dollars, primarily due to growth in Active Representatives and higher average order, due to an increase in Fashion and Home sales.

The region's adjusted Non-GAAP operating margin decline was largely driven by lower gross margin, which was caused primarily by the unfavorable net impact of pricing and mix, primarily due to the flow of excess inventory as well as the negative impact of foreign exchange. Sales deleverage was also a factor. Partially offsetting these items was lower investment in RVP, primarily in China.

Global Expenses

$ in millions

Fourth-Quarter 2012

FY 2012

% var. vs
4Q11

% var. vs
12M11

Total global expenses

$ 191.1

13%

$ 706.3

8%

Allocated to segments

(127.0)

(5)%

(474.2)

(5)%

Net global expenses

64.1

83%

232.1

53%

Adjusted Non-GAAP net global expenses

46.3

34%

187.5

30%

Avon will conduct a conference call at 9:00 A.M. today to discuss the quarterly results. The dial-in number for the call is (800) 843-2086 in the U.S. or (706) 643-1815 from non-U.S. locations (conference ID number: 89451727). The call will be webcast live at www.avoninvestor.com and can be accessed or downloaded from that site for a period of one year.

Avon, the company for women, is a leading global beauty company, with nearly $11 billion in annual revenue. As the world's largest direct seller, Avon is sold through more than 6 million active independent Avon Sales Representatives. Avon products are available in over 100 countries, and the product line includes color cosmetics, skincare, fragrance, fashion and home products, featuring such well-recognized brand names as Avon Color, ANEW, Skin-So-Soft, Advance Techniques, and mark. Learn more about Avon and its products at www.avoncompany.com.

Footnotes

1 "Adjusted" items refer to financial results presented in accordance with U.S. GAAP that have been adjusted to exclude certain costs as described below, under "Non-GAAP Financial Measures."

2 "RVP" - In the first quarter of 2012, we revised the definition of Representative Value Proposition to represent the expenses of activities directly associated with Representatives and independent leaders including the cost of incentives and sales aids (net of any fees charged). RVP no longer includes strategic investments such as the Service Model Transformation and Web enablement, and it no longer adjusts for the impact of volume.

Non-GAAP Financial Measures

To supplement our financial results presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we disclose operating results that have been adjusted to exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, including revenue growth, operating profit, adjusted Non-GAAP operating profit, operating margin, and adjusted Non-GAAP operating margin. We refer to these adjusted financial measures as Constant $ items, which are Non-GAAP financial measures. We believe these measures provide investors an additional perspective on trends. To exclude the impact of changes due to the translation of foreign currencies into U.S. dollars, we calculate current year results and prior year results at a constant exchange rate. Currency impact is determined as the difference between actual growth rates and constant currency growth rates.

We also present gross margin, selling, general and administrative expenses as a percentage of revenue, net global expenses, operating profit, operating margin, income from continuing operations, earnings per share from continuing operations and effective tax rate on a Non-GAAP basis. The discussion of our segments presents operating profit and operating margin on a Non-GAAP basis. We have provided a quantitative reconciliation of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP. The Company uses the Non-GAAP financial measures to evaluate its operating performance and believes that it is meaningful for investors to be made aware of, on a period-to-period basis, the impacts of 1) costs to implement ("CTI") restructuring initiatives, 2) the goodwill and intangible assets charges related to Silpada and the goodwill charge related to China (each an "Impairment charge," and collectively, "Impairment charges"), 3) the benefit related to the release of a provision associated with the excess cost of acquiring U.S. dollars in Venezuela ("Venezuelan special items"), and 4) the additional provision for income taxes as we are no longer assessing that the undistributed earnings of certain foreign subsidiaries are indefinitely reinvested ("Special tax items"). The Company believes investors find the Non-GAAP information helpful in understanding the ongoing performance of operations separate from items that may have a disproportionate positive or negative impact on the Company's financial results in any particular period.

The Impairment charges include the impact on the Statement of Income caused by the goodwill and intangible assets impairment charges related to Silpada in 2012 and 2011 and the goodwill impairment charge related to China in 2012. The Venezuelan special items include the impact on the Statement of Income caused by the release of a provision associated with the excess cost of acquiring U.S. dollars in Venezuela at the regulated market rate as compared to the official exchange rate. The Special tax items include the impact on the Statement of Income in 2012 caused by an additional provision for income taxes as we are no longer assessing that the undistributed earnings of certain foreign subsidiaries are indefinitely reinvested. During the fourth quarter of 2012, we determined that the Company may repatriate offshore cash to meet certain domestic funding needs.

These Non-GAAP measures should not be considered in isolation, or as a substitute for, or superior to, financial measures calculated in accordance with GAAP.

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this release that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "plan," "planned," "may," "will," "expect," "anticipate," "estimate," "would," "potential" and similar expressions, or the negative of those expressions, may identify forward-looking statements. Such forward-looking statements are based on management's reasonable current assumptions and expectations regarding the Company's current or future results and future business and economic conditions more generally. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management's expectations. Such factors include, among others, the following:

the possibility of business disruption in connection with our stabilization strategies, cost savings initiative, multi-year restructuring programs or other initiatives;

our ability to reverse declining margins and net income;

our substantial indebtedness and debt service obligations, our ability to access and generate cash to repay debt and cover debt service obligations, our access to short- and long-term financing, our ability to refinance upcoming maturities of our current indebtedness or to secure such refinancing at attractive rates and terms, our ability to secure other financing or to secure such other financing at attractive rates and terms, and our credit ratings and the impact of any changes on our financing costs and debt service obligations and access to lending sources;

our ability to realize sustainable growth from our investments in our brand and the direct-selling channel;

our ability to improve our business in North America, including enhancing our Leadership model;

a general economic downturn, a recession globally or in one or more of our geographic regions, or sudden disruption in business conditions, and the ability of our broad-based geographic portfolio to withstand an economic downturn, recession, cost inflation, commodity cost pressures, economic or political instability, competitive or other market pressures or conditions;

the effect of political, legal, tax and regulatory risks imposed on us in the United States ("U.S.") and abroad, our operations or our Representatives, including foreign exchange or other restrictions, adoption, interpretation and enforcement of foreign laws, including in non-U.S. jurisdictions such as Brazil, Russia, Venezuela and Argentina, and any changes thereto, as well as reviews and investigations by government regulators that have occurred or may occur from time to time, including, for example, local regulatory scrutiny in China;

our ability to improve working capital and effectively manage doubtful accounts and inventory and implement initiatives to reduce inventory levels, including the potential impact on cash flows and obsolescence;

our ability to achieve growth objectives, particularly in our largest markets, such as Brazil and the U.S., and developing and emerging markets, such as Mexico or Russia;

our ability to successfully identify new business opportunities and strategic alternatives and identify and analyze acquisition candidates, secure financing on favorable terms and negotiate and consummate acquisitions, as well as to successfully integrate or manage any acquired business;

the challenges to our businesses, such as Silpada and China, including the effects of rising costs, macro-economic pressures, competition, any potential strategic decisions, including the review of strategic alternatives for Silpada, and the impact of declines in expected future cash flows and growth rates, and a change in the discount rate used to determine the fair value of expected future cash flows, which have impacted, and may continue to impact, the estimated fair value of the recorded goodwill and intangible assets;

the effect of economic factors, including inflation and fluctuations in interest rates and currency exchange rates, as well as the designation of Venezuela as a highly inflationary economy, foreign exchange restrictions and the potential effect of such factors on our business, results of operations and financial condition;

general economic and business conditions in our markets, including social, economic and political uncertainties in the international markets in our portfolio;

any developments in or consequences of investigations and compliance reviews, and any litigation related thereto, including the ongoing investigations and compliance reviews of Foreign Corrupt Practices Act and related U.S. and foreign law matters in China and additional countries, as well as any disruption or adverse consequences resulting from such investigations, reviews, related actions or litigation;

key information technology systems, process or site outages and disruptions;

disruption in our supply chain or manufacturing and distribution operations;

other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations, large-scale power outages and similar events;

the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;

the quality, safety and efficacy of our products;

the success of our research and development activities;

our ability to attract and retain key personnel;

competitive uncertainties in our markets, including competition from companies in the cosmetics, fragrances, skincare and toiletries industry, some of which are larger than we are and have greater resources;

our ability to reverse declines in Active Representatives, to implement our Leadership program globally, to generate Representative activity, to increase the number of consumers served per Representative and their engagement online, to enhance the Representative and consumer experience and increase Representative productivity through field activation programs and technology tools and enablers, execution of Service Model Transformation and other investments in the direct-selling channel, and to compete with other direct-selling organizations to recruit, retain and service Representatives and to continue to innovate the direct-selling model;

the impact of the typically seasonal nature of our business, adverse effect of rising energy, commodity and raw material prices, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel;

our ability to protect our intellectual property rights;

the risk of an adverse outcome in any material pending and future litigations or with respect to the legal status of Representatives;

our ability to comply with certain covenants in our debt instruments, including the impact of any significant non-cash impairments, significant currency devaluations, or significant legal or regulatory settlements, or obtain necessary waivers from compliance with, or necessary amendments to, such covenants, and the impact any non-compliance may have on our ability to secure financing;

the impact of possible pension funding obligations, increased pension expense and any changes in pension regulations or interpretations thereof on our cash flow and results of operations; and

the impact of changes in tax rates on the value of our deferred tax assets and declining earnings on our ability to realize foreign tax credits in the U.S.

Additional information identifying such factors is contained in Item 1A of our Form 10-Q for the quarterly period ended September 30, 2012 and our Form 10-K for the year ended December 31, 2011. We undertake no obligation to update any such forward-looking statements.

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In millions, except per share data)

Three Months Ended

Percent

Twelve Months Ended

Percent

December 31

Change

December 31

Change

2012

2011

2012

2011

Net sales

$

2,955.7

$

2,997.9

(1)%

$

10,546.1

$

11,112.0

(5)%

Other revenue

43.4

45.8

171.0

179.6

Total revenue

2,999.1

3,043.7

(1)%

10,717.1

11,291.6

(5)%

Cost of sales

1,204.5

1,182.5

4,169.3

4,148.6

Selling, general and administrative expenses

1,574.9

1,585.3

5,980.0

6,025.4

Impairment of goodwill and intangible asset

209.0

263.0

253.0

263.0

Operating profit

10.7

12.9

(17)%

314.8

854.6

(63)%

Interest expense

27.5

23.4

104.3

92.9

Interest income

(4.6)

(3.2)

(15.1)

(16.5)

Other (income) expense, net

(21.4)

10.0

7.0

35.6

Total other expenses

1.5

30.2

96.2

112.0

Income (loss) from continuing operations, before tax

9.2

(17.3)

(153)%

218.6

742.6

(71)%

Income taxes

(170.3)

17.6

(256.8)

(216.2)

(Loss) income from continuing operations, net of tax

(161.1)

0.3

*

(38.2)

526.4

(107)%

Discontinued operations, net of tax

-

-

-

(8.6)

Net (loss) income

(161.1)

0.3

(38.2)

517.8

Net income attributable to noncontrolling interests

(1.1)

(0.7)

(4.3)

(4.2)

Net (loss) income attributable to Avon

$

(162.2)

$

(0.4)

*

$

(42.5)

$

513.6

(108)%

(Loss) earnings per share:(1)

Basic

Basic EPS from continuing operations

$

(.37)

$

-

*

$

(.10)

$

1.20

(108)%

Basic EPS from discontinued operations

$

-

$

-

$

-

$

(.02)

Basic EPS attributable to Avon

$

(.37)

$

-

*

$

(.10)

$

1.18

(108)%

Diluted

Diluted EPS from continuing operations

$

(.37)

$

-

*

$

(.10)

$

1.20

(108)%

Diluted EPS from discontinued operations

$

-

$

-

$

-

$

(.02)

Diluted EPS attributable to Avon

$

(.37)

$

-

*

$

(.10)

$

1.18

(108)%

Weighted-average shares outstanding:

Basic

432.1

430.9

431.9

430.5

Diluted

432.1

431.8

431.9

432.1

* Calculation not meaningful

(1)

Under the two-class method, (loss) earnings per share is calculated using net (loss) earnings allocable to common shares, which is derived by reducing net (loss) earnings by the (loss) earnings allocable to participating securities. Net (loss) earnings allocable to common shares used in the basic and diluted (loss) earnings per share calculation were ($159.2) and ($0.1) for the three months ended December 31, 2012 and 2011, respectively. Net (loss) earnings allocable to common shares used in the basic and diluted (loss) earnings per share calculation were ($42.2) and $508.1 for the twelve months ended December 31, 2012 and 2011, respectively.

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

December 31

December 31

2012

2011

Assets

Current Assets

Cash and cash equivalents

$

1,209.6

$

1,245.1

Accounts receivable, net

751.9

761.5

Inventories

1,135.4

1,161.3

Prepaid expenses and other

832.0

930.9

Total current assets

3,928.9

4,098.8

Property, plant and equipment, at cost

2,711.8

2,708.8

Less accumulated depreciation

(1,161.6)

(1,137.3)

Property, plant and equipment, net

1,550.2

1,571.5

Goodwill

374.9

473.1

Other intangible assets, net

120.3

279.9

Other assets

1,408.2

1,311.7

Total assets

$

7,382.5

$

7,735.0

Liabilities and Shareholders' Equity

Current Liabilities

Debt maturing within one year

$

572.0

$

849.3

Accounts payable

920.0

850.2

Accrued compensation

266.6

217.1

Other accrued liabilities

661.0

663.6

Sales and taxes other than income

211.4

212.4

Income taxes

73.6

98.4

Total current liabilities

2,704.6

2,891.0

Long-term debt

2,623.9

2,459.1

Employee benefit plans

637.6

603.0

Long-term income taxes

52.0

67.0

Other liabilities

131.1

129.7

Total liabilities

$

6,149.2

$

6,149.8

Shareholders' Equity

Common stock

$

188.3

$

187.3

Additional paid-in-capital

2,119.6

2,077.7

Retained earnings

4,357.8

4,726.1

Accumulated other comprehensive loss

(876.7)

(854.4)

Treasury stock, at cost

(4,571.9)

(4,566.3)

Total Avon shareholders' equity

1,217.1

1,570.4

Noncontrolling interests

16.2

14.8

Total shareholders' equity

$

1,233.3

$

1,585.2

Total liabilities and shareholders' equity

$

7,382.5

$

7,735.0

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

Twelve Months Ended

December 31

2012

2011

Cash Flows from Operating Activities

(Loss) income from continuing operations, net of tax

$

(38.2)

$

526.4

Adjustments to reconcile net income to net cash provided by operating activities:

Asia Pacific's decline in Active Representatives and increase in average order are impacted by the transition to a retail compensation model in
China. Due to this transition, the Active Representatives and average order performance metrics are not a relevant indicator of the underlying
business trends.

(2)

For a further discussion on our Non-GAAP financial measures, please refer to our discussion of Non-GAAP financial measures in this release
and reconciliations of our Non-GAAP financial measures to the related GAAP financial measure in the following supplemental schedules.

Asia Pacific's decline in Active Representatives and increase in average order are impacted by the transition to a retail compensation model in
China during the latter half of 2012. Due to this transition, the Active Representative and average order performance metrics are not a relevant
indicator of the underlying business trends.

(2)

For a further discussion on our Non-GAAP financial measures, please refer to our discussion of Non-GAAP financial measures in this release
and reconciliations of our non-GAAP financial measures to the related GAAP financial measure in the following supplemental schedules.

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

NON-GAAP FINANCIAL MEASURES

(Unaudited)

This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation
of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in
accordance with GAAP.

$ in Millions (except per share data)

THREE MONTHS ENDED 12/31/12

CTI

Reported

restructuring

Impairment

Venezuelan

Special

Adjusted

(GAAP)

initiatives

charge

special items

tax items

(Non-GAAP)

Cost of sales

$

1,204.5

$

1.3

$

-

$

-

$

-

$

1,203.2

Selling, general and administrative expenses

1,574.9

56.3

-

-

-

1,518.6

Operating profit

10.7

57.6

209.0

-

-

277.3

Income from continuing operations before taxes

9.2

57.6

209.0

(23.8)

-

252.0

Income taxes

(170.3)

(19.9)

(76.7)

8.1

168.3

(90.5)

(Loss) income from continuing operations

$

(161.1)

$

37.7

$

132.3

$

(15.7)

$

168.3

$

161.5

Diluted EPS from continuing operations

(0.37)

0.09

0.31

(0.03)

0.39

0.37

Gross margin

59.8%

-

-

-

-

59.9%

SG&A as a % of revenues

52.5%

(1.9)

-

-

-

50.6%

Operating margin

0.4%

1.9

7.0

-

-

9.2%

Effective tax rate

1845.3%

(0.4)

14.1

0.3

(1823.3)

35.9%

SEGMENT OPERATING PROFIT (LOSS)

Latin America

$

136.0

$

7.7

$

-

$

143.7

Europe, Middle East & Africa

131.4

0.1

-

131.5

North America

(201.4)

19.0

209.0

26.6

Asia Pacific

8.8

13.0

-

21.8

Global and other

(64.1)

17.8

-

(46.3)

Total

$

10.7

$

57.6

$

209.0

$

277.3

SEGMENT OPERATING MARGIN

Latin America

10.2%

0.6

-

10.8%

Europe, Middle East & Africa

14.5%

-

-

14.5%

North America

(39.0)%

3.7

40.5

5.2%

Asia Pacific

3.6%

5.3

-

8.8%

Global and other

-

-

-

-

Total

0.4%

1.9

7.0

9.2%

Amounts in the table above may not necessarily sum because the computations are made independently.

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

NON-GAAP FINANCIAL MEASURES

(Unaudited)

This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation
of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in
accordance with GAAP.

$ in Millions (except per share data)

TWELVE MONTHS ENDED 12/31/12

CTI

Reported

restructuring

Impairment

Venezuelan

Special

Adjusted

(GAAP)

initiatives

charges

special items

tax items

(Non-GAAP)

Cost of sales

$

4,169.3

$

4.5

$

-

$

-

$

-

$

4,164.8

Selling, general and administrative expenses

5,980.0

120.2

-

-

-

5,859.8

Operating profit

314.8

124.7

253.0

-

-

692.5

Income from continuing operations before taxes

218.6

124.7

253.0

(23.8)

-

572.5

Income taxes

(256.8)

(42.0)

(76.7)

8.1

168.3

(199.1)

(Loss) income from continuing operations

$

(38.2)

$

82.7

$

176.3

$

(15.7)

$

168.3

$

373.4

Diluted EPS from continuing operations

(0.10)

0.19

0.40

(0.04)

0.39

0.85

Gross margin

61.1%

-

-

-

-

61.1%

SG&A as a % of revenues

55.8%

(1.1)

-

-

-

54.7%

Operating margin

2.9%

1.2

2.4

-

-

6.5%

Effective tax rate

117.5%

(0.3)

(5.5)

0.1

(77.0)

34.8%

SEGMENT OPERATING PROFIT (LOSS)

Latin America

$

443.9

$

19.6

$

-

$

463.5

Europe, Middle East & Africa

312.8

11.8

-

324.6

North America

(214.9)

30.5

209.0

24.6

Asia Pacific

5.1

18.2

44.0

67.3

Global and other

(232.1)

44.6

-

(187.5)

Total

$

314.8

$

124.7

$

253.0

$

692.5

SEGMENT OPERATING MARGIN

Latin America

8.9%

0.4

-

9.3%

Europe, Middle East & Africa

10.7%

0.4

-

11.1%

North America

(11.3)%

1.6

11.0

1.3%

Asia Pacific

0.6%

2.0

4.9

7.5%

Global and other

-

-

-

-

Total

2.9%

1.2

2.4

6.5%

Amounts in the table above may not necessarily sum because the computations are made independently.

AVON PRODUCTS, INC.

SUPPLEMENTAL SCHEDULE

NON-GAAP FINANCIAL MEASURES

(Unaudited)

This supplemental schedule provides adjusted Non-GAAP financial information and a quantitative reconciliation
of the difference between the Non-GAAP financial measure and the financial measure calculated and reported in
accordance with GAAP.